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Wednesday, October 20, 2010

They already own two -- a 2008 Santa Fe sport utility vehicle and a 2005 Elantra -- and Mr. Harmon, a Chicago-area electrical contractor who owns several construction companies, has his eye on the Equus, a nearly $60,000 sedan that arrives in November.

"This will go head-to-head with the BMWs and Mercedes," Mr. Harmon said. "If you test-drive all of them with your eyes closed, you're going to pick the Hyundai."

The idea that Hyundai could compete with luxury automakers would have seemed absurd two decades ago, when its low-quality cars made the South Korean company a laughingstock in the United States.

These days, rivals know not to underestimate Hyundai and its affiliate, Kia, which have been posting record sales during one of the auto industry's most difficult periods.

"The challenge for the Korean companies is just to keep this winning streak going," said James Bell, executive market analyst with the automotive information firm Kelley Blue Book. "In a lot of ways, they followed the Japanese model of how to succeed in the marketplace."

But while Toyota and Honda built their empires largely on reliability and fuel economy, Hyundai and Kia have taken that formula a step further with a focus on making their vehicles attractive.

"You didn't really buy a Toyota Tercel because it was a beautiful car," Mr. Bell said. "The factor that the Koreans have added to that mix is styling."

As a result, Hyundai and Kia are becoming a serious threat to the Japanese dominance of most passenger car segments. Hyundai's midsize car, the Sonata, was the most researched vehicle in the country in May, according to Compete, a Boston research firm.

Sales of the Sonata, which accounts for one-third of Hyundai's total volume, are up about 50 percent this year, while demand for the Toyota Camry and the Honda Accord is down slightly. Even though the Camry and Accord remain tops in their segment, Hyundai has been closing the gap quickly.

Over all, Hyundai's market share in the United States has increased to nearly 5 percent, from 3 percent in 2008. Kia's share has grown to more than 3 percent, from 2.1 percent in 2008.

Together the two companies, which operate independently from each other in the United States but share some operations, now outsell the Japanese carmaker Nissan. In the second quarter, Hyundai was the fifth-most-considered brand in the country, bumping Nissan to sixth place, according to a Kelley Blue Book study.

Hyundai, Kia and Subaru of Japan were the only three automakers whose sales here increased in 2009.

Hyundai expects its United States sales to top 500,000 for the first time ever this year, as its rivals grapple with sales that are far below the level of several years ago, before the recession.

In fact, the recession has been a big reason behind the success that Hyundai and Kia have enjoyed in recent years. Their models are priced lower than most of the competition, but in better times many shoppers still might not have researched Hyundai or Kia enough to see what the vehicles offered.

"It gave us an opportunity to really reach some people who might not have looked at us before -- people who would have defaulted into an Accord or Camry," John Krafcik, the chief executive of Hyundai Motors America, said. "Times like these that force people to go deeper into the purchase analysis definitely favor us."

David Champion, the director of automotive testing for Consumer Reports, said shoppers who had not checked out Korean cars lately would probably be surprised.

"You're not getting a bargain-basement car," Mr. Champion said. "You're getting a very well-equipped car with good reliability. Every new Kia and Hyundai that we've tried has been so much better than the previous model and really, really competitive."

But for all their strides, the Korean companies still have work to do before they are broadly perceived to be among the industry's elite brands.

"It's still going to take time to get people into the cars and to spread the word of mouth," said Mr. Champion, who described Hyundai's foray into the luxury segments as selling "an Armani suit with a Wal-Mart label."

Hyundai and Kia have been marketing themselves heavily to overcome outdated perceptions -- in some cases filling voids left as the Detroit automakers pulled back on sponsorships and ads during big events like the Super Bowl.

"We didn't use to see doctors and lawyers and that type of affluent buyer, because it just wasn't socially acceptable to pull up in a Hyundai," said Brian Malpeli, who has sold Hyundais since the brand's early years and is the general sales manager at World Hyundai in Matteson, Ill. "But the more and more people start noticing us, the more they see the value in it."

Mr. Harmon, who bought his Santa Fe at World Hyundai, says saving thousands of dollars to get what he considers a more enjoyable vehicle trumps any concerns about whether the brand is fashionable.

"I know what kind of quality I'm sitting in," he said. "I don't care if I pull up next to a Porsche in my Santa Fe, because he spent $110,000 for his, and I spent $30,000 for mine, and I like mine more than his."